Volatile Growth Stocks: Opportunity Knocks with Dutch Bros and Airbnb

Growth Stocks: Volatile Nature, High Potential

Growth stocks are inherently volatile. That's simply part of the territory. Any company experiencing rapid revenue growth is bound to encounter obstacles and setbacks along the way. Speed comes with risks, and investors in this category must be prepared for some turbulence while striving for market-beating returns.

Of course, the optimal time to invest in exceptional growth stocks is when they're experiencing a dip. With that in mind, I believe it's an opportune moment to examine coffee chain operator Dutch Bros and vacation rental veteran Airbnb. These growth stocks are currently down more than 20% from their annual peaks, yet remain well-positioned for long-term success.

Dutch Bros: Brewing Up Nationwide Expansion

Let's start with Dutch Bros. This drive-through coffee chain has been around since 1992 but only recently entered the stock market in September 2021. This move signaled the start of a concentrated growth initiative, aiming to rapidly expand the West Coast favorite across the nation.

The expansion is progressing well but still has a considerable distance to go. Currently, Dutch Bros operates in 19 states. This coast-to-coast endeavor reflects the company's ambitious vision to reach a broader customer base. This strategic expansion demonstrates their intent to become a household name nationwide.

This expansion is evident in the company's financial performance. In the second-quarter report released in August, Dutch Bros reported a 28% year-over-year increase in revenue. The store count grew by 15.5%, and system-wide same-store sales increased by 6.1%. Sales growth was even more pronounced in company-owned locations, which explains management's preference for this operating model over franchise agreements. The company opened 61 new stores in the first half of 2025, with only 6 being franchised locations.

The company continues to deliver strong earnings reports and accelerate its growth plans. However, as of September 9, Dutch Bros' stock price has decreased by 24.2% from its all-time high in February. While this doesn't necessarily make the stock inexpensive, trading at 140 times trailing earnings and 7.5 times sales, I still view it as an opportunity to get in on the ground floor of an exciting growth story. The P/E ratio doesn't seem so high when considering it was a four-digit number (max value: 2,846) earlier this year.

Again, growth investing inherently involves some risk. But Dutch Bros has the potential to become the next Starbucks, with its friendly staff and refreshingly unique menu. Did you know that the company generates approximately 25% of its revenue from custom energy drinks? Management believes there are greater growth prospects in the rapidly expanding energy drink market than in the relatively mature coffee shop sector.

Investing in Dutch Bros is akin to getting in on Starbucks early, with the added potential of the energy drink market.

Airbnb: Turning Lockdown Losses into Gold

You're already familiar with Airbnb, which has dominated the private property rental market since the era of flip phones. However, don't assume this means the company is mature and slow.

Airbnb took a pause during the coronavirus pandemic for obvious reasons. However, have you noticed how quickly the company rebounded?

Airbnb's revenues have increased by 953% over the past five years. Free cash flow has swung from a negative $743 million to a profit of $4.3 billion during the same period. I acknowledge that I am starting this comparison from a low point. However, Airbnb exceeded its pre-COVID results by the end of 2022. This is a genuine long-term growth story, not merely a temporary rebound from the pandemic.

I agree that Airbnb faces unprecedented difficulties in 2025. The stock is down 24.5% from February's highs due to an uncertain travel industry. Management expects slower growth in the second half, facing tough year-over-year comparisons against last year's Paris Olympics event and shaky macroeconomics.

As a result, the stock trades at a fairly modest 30 times earnings and 18 times free cash flow. Airbnb is a high-growth cash machine, hiding out in Wall Street's bargain bin due to short-term challenges.

Please note: This analysis is for informational purposes only and does not constitute investment advice. Investors should conduct their own research before making any investment decisions.